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United States Government Accountability Office:
GAO:
Report to the Chairwoman, Committee on Agriculture, Nutrition, and
Forestry, U.S. Senate:
March 2014:
International Food Aid:
Better Agency Collaboration Needed to Assess and Improve Emergency
Food Aid Procurement System:
GAO-14-22:
GAO Highlights:
Highlights of GAO-14-22, a report to the Chairwoman, Committee on
Agriculture, Nutrition, and Forestry, U.S. Senate.
Why GAO Did This Study:
USDA and USAID spent about $9.2 billion to provide international
emergency food aid during fiscal years 2007-2012. USDA developed WBSCM
with USAID's input to manage domestic and international food aid
procurements. USDA spent about $187 million to develop and implement
the system. GAO was asked to examine the international emergency food
aid procurement process.
This report examines (1) the extent to which agencies agree to use
WBSCM to manage the process, (2) how the agencies' use of WBSCM and
other systems affects USDA's ability to have accurate information, and
(3) the extent to which the agencies are collaborating on how to use
WBSCM. GAO reviewed the procurement process and observed WBSCM in use.
We analyzed inventory spreadsheets used to compile USDA's financial
reports. We compared agencies' efforts to collaborate against key
elements for effective interagency collaboration.
What GAO Found:
Although the U.S. Department of Agriculture (USDA) and U.S. Agency for
International Development (USAID) jointly manage international
emergency food aid procurement, the agencies disagree about the
usefulness of the Web Based Supply Chain Management (WBSCM) to manage
the entire process. WBSCM had significant deficiencies when it was
implemented in April 2011, which led USAID to discontinue using it to
procure ocean freight for bulk commodities, manage prepositioned or
stockpiled commodity inventory, and track food aid shipments. For
example, WBSCM was slow and time consuming to use and its process to
procure ocean freight for bulk commodities was not compatible with
USAID's process to negotiate contracts with ocean freight vendors.
USDA currently uses WBSCM to procure food aid commodities, while USAID
procures ocean freight using other systems not connected to WBSCM.
Since March 2012, USDA has made changes to WBSCM, and USDA officials
assert that these changes address some of the problems that led to
USAID's decision to discontinue use of the system.
Since USAID uses systems outside of WBSCM, USAID and USDA lack
information on individual food aid shipments, which, in turn, hinders
USDA's ability to use WBSCM to prepare reports and efficiently file
claims against ocean carriers to recover U.S. government funds. GAO's
Standards for Internal Control in the Federal Government state that
information should be accurately recorded and communicated to those
who need it and in a form that enables them to carry out their
internal control and other responsibilities. USAID relies on freight
forwarders to track and periodically provide information on shipments.
In GAO's work for a recent report, we found that freight forwarders
did not collect complete or consistent information on emergency food
aid shipments. Without accurate information from its freight
forwarders, USAID is limited in its ability to generate accurate
information on food aid shipments. In addition, GAO found that USAID
and its warehouse contractors did not always accurately record all
prepositioned commodity inventory transactions. USAID provides this
potentially inaccurate information to USDA officials who enter this
information into WBSCM to generate quarterly financial statements.
Moreover, USAID's data collection outside WBSCM makes it more
difficult for USDA to file claims efficiently against ocean freight
vendors and recover U.S. funds because USDA officials must manually
enter USAID information. According to USDA officials, USDA filed 131
such claims in fiscal year 2012 valued at $1.2 million.
USDA and USAID are not collaborating effectively to resolve their
disagreement on the usefulness of WBSCM. In prior work, GAO identified
key elements of effective collaboration that can enhance and sustain
collaboration among federal agencies. Although USDA and USAID's
collaborative efforts have incorporated some of these elements to
develop WBSCM, they have not incorporated others. Specifically, USDA
and USAID do not agree on the roles and responsibilities of key
participants in the process, do not share a defined outcome for their
collaboration, and do not have a written agreement stating how the
agencies will collaborate. An upcoming functional upgrade of WBSCM
offers an opportunity to make substantial changes that are mutually
agreeable.
What GAO Recommends:
GAO recommended the agencies work together to ensure USDA receives
accurate prepositioned inventory data, improve WBSCM's functionality
by testing modified functions, and develop a written agreement that
clearly outlines outcomes and roles and responsibilities for using
WBSCM. USAID noted its view that prepositioned commodities move off
USDA's books and onto those of USAID but agreed in general with our
other two recommendations. USDA agreed with our recommendations and
stated that the Commodity Credit Corporation retains ownership of
prepositioned commodities.
View [hyperlink, http://www.gao.gov/products/GAO-14-22]. For more
information, contact Thomas Melito at (202) 512-9601 or
melitot@gao.gov.
[End of section]
Contents:
Letter:
Background:
USDA and USAID Disagree on WBSCM's Usefulness in Managing the
International Emergency Food Aid Procurement Process:
USAID's Use of Other Systems Hinders USDA's Ability to Prepare
Accurate Reports and Efficiently File Claims Against Ocean Carriers to
Recover Government Funds:
USDA and USAID Have Not Resolved Their Disagreement about WBSCM, but
Planned System Upgrades Provide an Opportunity to Collaborate More
Effectively:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Comments from the U.S. Department of Agriculture:
Appendix III: Comments from the U.S. Agency for International
Development:
Appendix IV: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Figures:
Figure 1: Costs and Percentages of U.S. Title II Emergency Food Aid
Components, Fiscal Year 2012:
Figure 2: USDA and USAID Standard Title II Emergency Food Aid
Procurement Process:
Abbreviations:
CCC: Commodity Credit Corporation:
FSA: Farm Service Agency:
OMB: Office of Management and Budget:
USAID: U.S. Agency for International Development:
USDA: U.S. Department of Agriculture:
WBSCM: Web Based Supply Chain Management system:
[End of section]
United States Government Accountability Office:
GAO:
441 G St. N.W.
Washington, DC 20548:
March 26, 2014:
The Honorable Debbie Stabenow:
Chairwoman:
Committee on Agriculture, Nutrition, and Forestry:
United States Senate:
Dear Chairwoman Stabenow:
The U.S. Department of Agriculture (USDA) and the U.S. Agency for
International Development (USAID) spent about $9.2 billion to procure
and deliver international emergency food aid during fiscal years 2007
through 2012 as authorized by Title II of the Food for Peace Act.
[Footnote 1] USDA and USAID have joint responsibility for the U.S.
government response to emergency food crises, such as the 2013 typhoon
in the Philippines and the persistent droughts in East Africa. In
addition, USAID relies on cooperating sponsors, such as the World Food
Program, and their contractors, to deliver food aid. Congress
appropriates funds for the Food for Peace program to USDA, which it
uses to procure commodities. USDA also allocates a portion of these
funds to USAID to implement the program and arrange ocean freight
transportation.[Footnote 2] Although USDA is responsible for adhering
to financial reporting requirements with respect to funds transferred
to USAID, it is USAID's responsibility to make every effort within
reason to track and account for these funds and to report this
information to USDA.[Footnote 3]
Between 2003 and 2011, USDA planned, designed, and implemented a Web
Based Supply Chain Management system (WBSCM, referred to as "Web S-C-
M") with input from USAID to replace what it considered to be an
outdated food aid procurement system. USDA intended WBSCM to be the
procurement and supply chain management system for both the U.S.
government's domestic and international food aid programs. As of the
end of fiscal year 2013, USDA had spent more than $187 million to
design, implement, operate, and maintain WBSCM.
The Senate Committee on Agriculture, Nutrition, and Forestry asked us
to examine USDA's international food aid procurement process. This
report examines (1) the extent to which agencies agree to use WBSCM to
manage the international emergency food aid procurement process; (2)
how the agencies' use of WBSCM and other systems affects USDA's
ability to have accurate information about emergency international
food aid shipments; and (3) the extent to which the agencies are
collaborating on how to use WBSCM.
To examine the extent to which agencies agree to use WBSCM and other
systems to manage the international food aid procurement process for
the Food for Peace, Title II program, we collected information about
how WBSCM is used to procure commodities and ocean freight
transportation.[Footnote 4] We observed how USDA's Farm Service
Agency's (FSA) Commodity Operations Office and the USAID's Office of
Food for Peace use WBSCM, and we observed how USAID uses its Food for
Peace Management Information System. We examined agency documents to
determine the roles and responsibilities of agency officials and their
international stakeholders. Stakeholders include cooperating sponsors
that implement emergency food aid programs on behalf of USAID; freight
forwarders that manage ocean freight logistics, commodity vendors,
ocean freight vendors, and contractors that manage the warehouses
where USAID prepositions or stockpiles commodities for emergencies
overseas.
To examine how the agencies use of WBSCM and other systems affects
USDA's ability to have accurate information about food aid shipments,
we analyzed how Congress appropriates funds for this program to USDA's
Commodity Credit Corporation (CCC). We also reviewed the Office of
Management and Budget's Circular A-136 and USDA and USAID's Offices of
Inspector General Reports. We used this information to determine the
funding relationship between the agencies and the financial
responsibilities each has in accounting for U.S. government resources
and funds for this program. We also drew on work conducted for a
separate report to describe the systems that USAID relies upon to
track emergency food aid shipments.[Footnote 5] In that report, we
also looked at how USAID collects data on emergency food aid shipments
and we determined the data to be sufficiently reliable for our
analysis. We compared GAO's Standards for Internal Control in the
Federal Government to USDA and USAID actions in the procurement
process.[Footnote 6]
To examine the extent to which the agencies are collaborating on how
to use WBSCM, we compared U.S. agencies' efforts to resolve their
disagreement on how to use WBSCM against key considerations that we
identified in 2012 for implementing effective interagency
collaboration with practices for enhancing and sustaining
collaboration that we identified in 2005.[Footnote 7] Based on our
analysis of the agencies' actions, we found that clearly defining
roles and responsibilities, defining a common outcome, and having a
written formal agreement to collaborate were the most relevant
practices to assess their efforts.
As part of this review, we obtained commodity and ocean freight
funding data for fiscal years 2007 through 2012 from USAID, and we
determined that the data were sufficiently reliable for our purposes.
We also interviewed agency officials at USAID's Food for Peace and
Transportation Offices and at the USDA's Agricultural Marketing
Service, the FSA, including the Commodity Operations Office, and the
Foreign Agriculture Service in Washington, D.C., and Kansas City,
Missouri; as well as cooperating sponsors and freight forwarders. For
additional details about our scope and methodology, see appendix I.
We conducted this performance audit from March 2013 to March 2014 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
U.S. Title II Emergency Food Aid Program, Cost, and Funding:
Under Title II of the Food for Peace Act, the United States provides
agricultural commodities to address famine and food crises in foreign
countries. Between fiscal years 2007 and 2012, the United States spent
about $9.2 billion to provide emergency food aid to 57 countries
through its cooperating sponsors, such as the World Food Program,
Catholic Relief Services, and Save the Children Federation. The United
States annually spent between $1.1 billion and $2.0 billion to
purchase and deliver about 1 to 2 million metric tons of emergency
food aid to recipients in foreign countries.
U.S. agencies spend the largest percentage of food aid funds to
procure and transport commodities within the United States, and second
largest on the transport, storage, and handling of commodities in
recipient countries. Figure 1 illustrates this distribution of
spending for fiscal year 2012. USAID and cooperating sponsors spent
the third largest percentage of funds on ocean freight contracts to
transport commodities across the ocean. USAID directed the remaining
funds to cooperating sponsors to develop and manage programs and
deliver commodities from discharge ports to landlocked recipient
countries. Of the emergency food aid funds directed to cooperating
sponsors, the World Food Program administered over 80 percent, while
other cooperating sponsors administered the rest. USAID and
cooperating sponsors contracted with seven ocean freight forwarders to
act on behalf of USAID and its cooperating sponsors to manage ocean
transportation logistics throughout the shipping process.
Figure 1: Costs and Percentages of U.S. Title II Emergency Food Aid
Components, Fiscal Year 2012:
[Refer to PDF for image: pie-chart]
Total: $1.17 billion.
Commodity and U.S. transportation procurement: 41%; $0.47 billion[A];
Ocean freight: 14%; $0.17 billion[B];
Cooperating sponsor program development and management: 8%; $0.10
billion[C];
Inland freight (foreign): 7%; $0.09 billion[D];
Internal transportation, storage, and handling: 30%; $0.35 billion[E].
Source: GAO analysis of U.S. Agency for International Development data.
[A] Commodity and U.S. transportation procurement includes funds paid
to commodity vendors that provide commodities and arrange for their
domestic transportation to U.S. transfer locations.
[B] Ocean freight includes funds paid to freight vendors that
transport emergency food aid from U.S. ports overseas to foreign
ports, or to inland points.
[C] Cooperating sponsor program development and management" refers to
funding provided to assist cooperating sponsors with establishing
programs in foreign countries pursuant to Section 202(e) of the Food
for Peace Act (7 USC 1722(e)).
[D] Inland freight is the cost associated with transporting
commodities from the port of discharge to the border of the foreign
destination country if the destination country is landlocked.
[E] Internal transportation, storage, and handling includes costs such
as storage, distribution, and oversight of commodities to the final
foreign destination, such as storage and distribution sites. USAID
provides these funds directly to cooperating sponsors as a cash
contribution.
[End of figure]
Various Entities Procure and Deliver Emergency Food Aid:
USDA and USAID jointly manage Food for Peace emergency food aid
procurement. USDA procures commodities for the program and USAID or
its cooperating sponsors procure ocean transportation for the
commodities. The agencies use a three-phase procurement process: (1)
acquisition planning (reviewing and responding to food requests), (2)
contract formation (procuring commodities and transportation), and (3)
contract administration (delivering commodities and overseeing the
process).[Footnote 8] See figure 2 for an overview of the process to
procure packaged and bulk commodities and ocean freight.[Footnote 9]
Figure 2: USDA and USAID Standard Title II Emergency Food Aid
Procurement Process:
[Refer to PDF for image: process illustration]
Acquisition Planning:
1. Cooperating sponsors make food requests to U.S. Agency for
International Development (USAID);
2. USAID reviews the food request and, if approved, forwards the
request to U.S. Department of Agriculture (USDA) for review and
approval.
Contract Formation:
3. USDA solicits contract bids from food commodity vendors; USDA,
USAID, and cooperating sponsors solicit contract offers from ocean
freight vendors;
4. USDA evaluates commodity bids and freight offers according to
lowest landed cost (the cost of the commodity plus transportation
charges);
5. USDA procures food commodities;
6. USAID assists cooperating sponsors to procure ocean freight for the
delivery of food commodities to foreign destinations.
Contract Administration:
7. Commodity vendors provide food commodities and deliver them from
their production facilities to domestic transfer points
8. Stevedores—-individuals or firms that contract to load or unload a
ship-—unload food commodities from rail cars or trucks, document the
delivery, and load the food commodities onto ocean vessels that
transport them overseas;
9. USDA pays commodity vendors;
10. Cooperating sponsors pay ocean freight vendors for ocean
transportation, and USAID reimburses cooperating sponsors for the
ocean freight;
11. Surveyors report commodities delivered to cooperating sponsors and
USDA;
12. If necessary, USDA processes claims against ocean freight vendors.
Source: GAO analysis of U.S. Department of Agriculture and U.S. Agency
for International Development data.
[End of figure]
USAID's standard procurement process for emergency food aid is to
procure and ship commodities in response to a request from cooperating
sponsors for a specific food emergency. However, USAID may also
preposition commodities in domestic and overseas warehouses located
near regions of the world with historically high emergency food aid
needs.[Footnote 10] Using this approach, USAID requests commodities
from USDA and ships them to a warehouse before a need for the
commodities is identified.[Footnote 11] For the commodities shipped to
warehouses, ocean freight vendors submit invoices directly to USAID
for payment, and USDA retains ownership of the commodities until
cooperating sponsors pick up the commodities from the warehouses,
according to USDA. As a result, commodities in these warehouses remain
on USDA's accounting ledger as inventory assets until cooperating
sponsors make requests and take possession of the commodities for
their programs. Since USAID contracts for the management of its
domestic and overseas warehouses, USDA requires USAID to provide it
with information on the type, amount, and value of commodities in each
warehouse's inventory.
In addition, USAID can divert commodities originally destined for a
prepositioned warehouse to respond to a cooperating sponsor's
emergency food aid request.[Footnote 12] When diversion occurs,
instead of delivering commodities to a prepositioned warehouse as
planned, ocean freight vendors deliver to an alternate port that is
specified on the ocean freight contract or to a cooperating sponsor at
the same foreign port as the warehouse. As a result, the ship, foreign
port, ocean bill of lading, and cost of ocean freight can change from
what was originally agreed to under the initial ocean freight
contract.[Footnote 13]
USDA Developed WBSCM to Manage Food Aid Procurement:
The USDA's Agricultural Marketing Service, which procures commodities
for USDA's domestic food aid programs, funded most of WBSCM's design
and currently manages the system.[Footnote 14] WBSCM replaced USDA's
ordering, procurement, and inventory systems, some of which USDA
considered costly and outdated.[Footnote 15] These systems did not
electronically manage the entire food aid procurement process, provide
accurate inventory accounting, or track commodity shipments in real
time. USDA also could not use the systems to electronically process
invoices and payments. USDA expected WBSCM to integrate supply chain
activities of up to 40,000 users, process requests for 4.5 million
metric tons of domestic and international food aid each year, manage
electronic contracting for commodities and freight, track inventory,
pay vendors, and process claims. USDA intended that all stakeholders
including those participating in international food assistance would
use WBSCM as a supply chain management system. To do so, WBSCM uses
data entered during earlier steps of the process to complete some of
the later steps. Therefore, information needs to be entered in a
sequential order for the later functions of the system to work
correctly.
USDA developed the business case for WBSCM in 2003 and awarded the
contract for developing the software in October 2006. To identify the
international food aid procurement functions, USDA established an
interagency project team that included representatives from USDA's
Farm Service Agency (FSA) and Foreign Agriculture Service and USAID's
Food for Peace and Transportation Offices. The interagency team
started to develop the system's technical requirements for the food
aid programs in 2007. Agencies began the initial testing phase of
WBSCM in November 2009, and USDA began a phased rollout of WBSCM in
June 2010, focusing primarily on domestic food aid procurement.
USDA and USAID Disagree on WBSCM's Usefulness in Managing the
International Emergency Food Aid Procurement Process:
USDA and USAID disagree about the usefulness of WBSCM to manage the
entire emergency food aid procurement process. Although USDA created
WBSCM with input from USAID, the system had deficiencies when it was
implemented in April 2011. Since August 2011, USAID has not been using
WBSCM as intended to procure ocean freight for bulk commodities,
manage commodity inventory in preposition warehouses, or track food
aid shipments. USAID manages its part of the procurement process using
other systems not connected to WBSCM. USDA officials assert that,
since March 2012, the agency has made significant improvements to
WBSCM that would address many of the problems that led to USAID's
discontinued use of the system's functions to procure bulk commodity
ocean freight, manage commodity inventory, and track food aid
shipments.[Footnote 16]
USAID Has Not Used WBSCM as Intended Because It Had Significant
Deficiencies at Implementation:
WBSCM had deficiencies when it was implemented in April 2011, so USAID
gradually discontinued using it to procure ocean freight for bulk
commodities, manage commodities for prepositioned warehouses, and
track food aid shipments between August 2011 and June 2012. When USDA,
USAID, and several international stakeholders, such as USAID's
cooperating sponsors and freight forwarders, started to use WBSCM,
they immediately encountered significant problems. The USDA's Foreign
Agricultural Service reported in an April 2011 memo that WBSCM might
not be ready to handle complex international food aid procurements
involving multiple delivery points and commodities. In June 2011,
USAID informed USDA in a letter that its stakeholders found WBSCM time
consuming to use. In addition, USAID stated that the system's process
to procure international bulk ocean freight was not compatible with
USAID's process and recommended that neither agency use WBSCM to
procure bulk ocean freight.[Footnote 17] For example, USAID informed
USDA that WBSCM could not account for key information--such as current
market conditions, available funding, alternate foreign ports, and
available ships with sufficient cargo space--that USAID needed to
negotiate with vendors when procuring ocean freight for bulk
commodities. In addition, USAID and its stakeholders experienced
substantial performance problems and indicated that the system was
cumbersome and not user friendly. In a July 2011 memo, USDA
acknowledged deficiencies in WBSCM and stated it was working to fix
problems. For example, the USDA memo acknowledged USAID's difficulties
in using WBSCM to procure bulk freight.
Moreover, freight forwarders that manage ocean freight logistics for
the cooperating sponsors identified concerns they had about the
additional workload WBSCM required of them. For example, they noted in
June 2011 that WBSCM required them to enter data historically
completed by stevedores (contractors who load or unload commodities)
at U.S. load ports, which increased the freight forwarders' workload
and created confusion about what commodity was being delivered,
loaded, and unloaded at U.S. load ports. Furthermore, WBSCM's initial
inability to track food aid shipments, such as recording when a
shipment had been diverted before the commodities arrived in a foreign
location, posed a problem for freight forwarders. As a result, the
freight forwarders experienced unnecessary delays in coordinating
information with ocean freight vendors and providing these vendors
with required instructions for shipping and unloading cargoes.
As a result of difficulties in using WBSCM, USAID discontinued using
it for certain functions. In August 2011, USAID issued a memo to
cooperating sponsors, freight forwarders, ocean transportation
providers and their brokers stating that, effective immediately, all
bid offers for bulk ocean freight transportation shipped under the
Title II program did not need to be submitted through WBSCM. USAID
also decided it would not use WBSCM to manage its prepositioned
commodity inventories. At that time, a USAID official informed USDA
that USAID had a number of issues with WBSCM that needed to be
addressed for it to effectively manage prepositioned commodity
inventories using the system. The official further stated that until
these issues were fixed, USAID would continue to work outside WBSCM to
manage these inventories.
In response to concerns expressed about WBSCM, USDA and USAID
announced the formation of an interagency team in November 2011 to
address international stakeholders' concerns with WBSCM. At that time,
the WBSCM program manager acknowledged that USDA had been unable to
implement timely solutions for the problems that the international
stakeholders had faced and that WBSCM had been designed with
insufficient input from the international stakeholders. During
November and December 2011, the agencies held meetings to identify
needs and priorities, created an action list, and assigned individual
USDA and USAID officials to specific tasks on the list.
Despite these efforts, USAID and international stakeholders continued
to have concerns about using WBSCM. USAID eventually decided in
February 2012 that WBSCM should only be used for USDA to procure
commodities. As a result, USAID awards ocean freight contracts for
bulk and packaged commodities outside of WBSCM. Furthermore, in June
2012, USAID and USDA agreed that freight forwarders did not need to
use WBSCM to update ocean freight contracts. Rather, freight
forwarders continue to update ocean freight contracts in their own
separate systems.
USAID Manages Its Procurement Process Using Systems Not Connected to
WBSCM:
USAID and its international stakeholders currently perform most of the
functions required to procure bulk ocean freight in systems not
connected to WBSCM. For example, USAID receives bulk freight bids via
email and negotiates bulk ocean freight contracts directly with
vendors. According to USDA officials, USDA then manually enters the
awarded ocean freight contract information for bulk commodities in
WBSCM. In addition, USAID officials said they do not use WBSCM to
record changes to ocean freight. As a result, USDA does not receive
updates in WBSCM when USAID makes changes to the shipment, or when
freight forwarders divert commodities on USAID's behalf.
USAID officials also said they do not use WBSCM to track inventory of
prepositioned commodities because key information required to track
commodities from the U.S. load port to overseas warehouses is not
entered in WBSCM. As we noted above, USAID informed USDA in August
2011 that the agency would continue to track and allocate
prepositioned commodity inventory using other systems. Instead of
using WBSCM, USAID officials track prepositioned commodity inventory
using spreadsheets with information from USAID's contractors at its
prepositioned warehouses. USAID officials send USDA a consolidated
spreadsheet, and USDA officials manually enter inventory data in WBSCM
to provide food aid information for the Commodity Credit Corporation's
(CCC) quarterly financial statements.[Footnote 18]
USDA Asserts That It Has Made Significant Improvements to WBSCM:
USDA officials have stated that, since March 2012, the agency has made
significant improvements to WBSCM that address many of its
difficulties. During the course of our review, USDA officials stated
that several of WBSCM's shortcomings, such as poor functionality and
ease of use, have been addressed.[Footnote 19] They also noted that
USDA's Foreign Agriculture Service currently uses WBSCM to manage all
procurement functions for its international food aid programs and
requires stakeholders to manage aspects of the programs, including
updating ocean freight information, in WBSCM.[Footnote 20] In
addition, USDA officials noted that they have modified the inventory
management function of WBSCM that could be used to track prepositioned
inventory. They also said that they have modified WBSCM sufficiently
to facilitate tracking changes in freight information. For example,
these officials said that WBSCM had been modified so that it can
capture needed information when a shipment has been divided to ship on
multiple vessels.
According to USDA officials, the agency would like USAID to resume
fully using WBSCM, which would address USDA concerns regarding the
lack of current information about shipments after they depart U.S.
ports and inventory of prepositioned commodities. USAID officials from
the Food for Peace and Transportation Offices indicated in August 2013
that they are currently able to manage their portion of the emergency
food aid program without expanding their use of WBSCM. They also
indicated that they would consider using WBSCM again if USDA made
substantial improvements that addressed their concerns. However, as of
February 2014, USAID had not tested WBSCM's ability to manage
prepositioned commodity inventory and track food aid shipments since
USDA made changes to the system.
USAID's Use of Other Systems Hinders USDA's Ability to Prepare
Accurate Reports and Efficiently File Claims Against Ocean Carriers to
Recover Government Funds:
Since USAID uses systems outside of WBSCM, USAID and USDA lack
complete and accurate information on individual food aid shipments,
which, in turn, hinders USDA's ability to use WBSCM to prepare
accurate financial reports and recover U.S. government funds. For
example, USAID's systems cannot provide tracking information on some
food aid shipments. In addition, USAID's current systems for tracking
the inventory of commodities that it has in prepositioning warehouses
lack sufficient internal controls, according to the USAID Inspector
General, thus hindering the agencies' abilities to verify commodity
inventories.[Footnote 21] USAID's data collection outside of WBSCM
also makes it more difficult for USDA to efficiently file claims to
recover U.S. government funds.
USAID's Systems Cannot Provide Information on Some Food Aid Shipments:
In our work for a recent report on the impact of prepositioning on the
timeliness of emergency food aid, we found that some information on
emergency food aid shipments in WBSCM could not be used to assess
their delivery timeframes.[Footnote 22] USAID's Office of Food for
Peace informed USDA in a February 2012 letter that USAID would rely on
its Transportation Office and the freight forwarders to track and
periodically provide information on shipments. In addition, in June
2012 USAID informed freight forwarders that they no longer were
expected to update tracking information for emergency food aid
shipments into WBSCM. However, in our related GAO report on
prepositioning food aid, we found that USAID does not maintain
tracking data on food aid shipments that would allow it to assess the
timeliness of deliveries. Rather, the freight forwarders maintain
tracking data in their own, separate systems from which USAID can
request data.
USDA has expressed concerns that it does not have complete and
accurate information it needs and it is unclear whether USAID has
sufficient internal controls over the data that freight forwarders
collect on individual shipments of emergency food aid. GAO's Standards
for Internal Control requires that agencies implement appropriate
control activities, such as ensuring that transactions are recorded in
a complete and accurate manner.[Footnote 23]
USDA's FSA issued a memo in April 2012 outlining the implications of
USAID's decision in February 2012 to not use WBSCM to track food aid
shipments. Specifically, FSA stated that administering activities
outside of WBSCM would increase the number of errors, be more labor
intensive, and create additional strain on FSA's resources. FSA also
stated that by not using these features of WBSCM, USAID would limit
the government's ability to track commodities from initial order
through final delivery. In addition, FSA officials have indicated that
USAID's decision to stop requiring freight forwarders to enter updated
freight award information in WBSCM affects the accuracy of ocean
freight information in WBSCM, such as the price paid to transport
commodities; the foreign destination port; and the vessel used. FSA
officials noted that this is information they need to prepare reports
on food aid shipments. In addition, USAID has not provided guidance on
the information that USAID and USDA need collected on individual
shipments.
Furthermore, when we obtained information on over 5,000 food aid
shipments from fiscal years 2007 through 2012 for our recent report,
we found that some of the information contained inaccuracies and was
not consistently collected.[Footnote 24]
We found that for three of the six freight forwarders, their data were
incomplete due to missing shipments and partial information provided
for other shipments. As a result, we were unable to use their
information to assess the timeframes of their deliveries. In addition,
we found inconsistencies in the information collected. For example, to
identify the starting date of a shipment, the World Food Program
provided the date that USAID and the World Food Program signed a grant
agreement. However, the freight forwarders' data show dates that
approximate the dates when the cooperating sponsors requested the food
from USAID.[Footnote 25]
USDA and USAID Have Been Unable to Verify Overseas Commodity Inventory
Data:
A recent USAID inspector general report and independent audits of the
Commodity Credit Corporation (CCC) raise concerns that USAID and
USDA's current systems for tracking commodities that USAID has
prepositioned in warehouses may have insufficient internal controls,
hindering the agencies' abilities to verify commodity inventories.
Similarly, we found that USAID's commodity inventory spreadsheets
contained missing data and incorrect formulas to compile inventory
information.
A January 2013 USAID inspector general report found that internal
control weaknesses in USAID's prepositioning inventory records caused
irreconcilable discrepancies between the agency's records and
warehouse inventory records. According to USAID's Automated Directives
System, contract officer representatives must ensure that the
cooperating sponsor is performing in accordance with the terms
contained in the contract. However, the inspector general found that
USAID's Transportation Office, foreign warehouses and others did not
have an adequate system in place to consistently identify and resolve
discrepancies in inventory records. Specifically, the audit found that
the amount of incoming and outgoing food at the Djibouti warehouse
could not be reconciled within the threshold established in the
warehouse contract. The audit stated that commodity differences can
result from changes in shipments or commodity losses. It also noted
that discrepancies in records resulted from a number of factors,
including incomplete records and incomplete survey reports conducted
by an independent contractor monitoring warehouse activities.
According to the report, reconciliations throughout the supply chain
would improve the system's reliability and allow USAID to evaluate the
performance of warehouse contractors accurately. The inspector general
recommended that USAID implement a system of internal controls to
reconcile its records regularly with reports from warehouses and
outgoing shipment reports to identify and resolve differences in a
timely manner.
Furthermore, independent audits of CCC's financial activities showed
instances where USDA had insufficient internal controls to verify
commodity information that it received from USAID; as a result, the
independent audits reported significant deficiencies in CCC's
financial statements.[Footnote 26] GAO's Standards for Internal
Control state that control activities, such as reviews of management
at the functional or activity level, are an integral part of an
entity's accountability for government resources. However, the audits
reported USDA's controls over foreign prepositioned inventory
distributed by USAID as a significant deficiency in CCC's financial
statements for fiscal years 2012 and 2013.[Footnote 27] Specifically,
the fiscal year 2012 audit noted that the process USDA used to
determine the amount of inventory on hand at foreign warehouses
consisted only of an email sent from USAID to USDA outlining the
levels of inventory by commodity. It found that CCC had no evidence of
adequate controls or policy and procedures over the warehouse
inventory information to determine whether the balances reported by
USAID are reasonable prior to entries by CCC. During the course of our
review, USDA officials responsible for entering inventory information
into WBSCM to produce CCC's financial reports confirmed that they
cannot verify the inventory information they receive from USAID.
In addition, we found that some of the spreadsheets that USAID used to
compile inventory information were missing data and contained
incorrect formulas. We reviewed spreadsheets for 6 warehouses where
USAID prepositions commodities and found errors in 3 of them. For
example, we found that the spreadsheet that the contractors used to
track inventory at the prepositioning warehouse in Djibouti contained
errors. It showed eight instances in which contractors documented
commodities leaving the warehouse before the same commodities were
documented as entering the warehouse. We also found two instances in
which contractors recorded commodities leaving the warehouse 4 months
after they had left the warehouse. To determine inventory levels,
contractors at each warehouse submit inventory information to USAID,
which consolidates the information into a single spreadsheet that it
provides to USDA. As a result, inaccuracies in a single warehouse
inventory spreadsheet create inaccuracies in USAID's consolidated
spreadsheets. USDA officials enter information provided by USAID into
WBSCM to generate various reports, including CCC's quarterly financial
statements to the Office of Management and Budget.
USAID's Data Collection Outside WBSCM Impedes USDA's Process to
Recover U.S. Government Funds Efficiently:
USAID's data collection outside WBSCM impedes USDA's process to file
claims against ocean freight vendors and recover U.S. funds. When an
ocean freight vendor loses or damages a portion of the commodities
loaded onto its vessels, the vendor is liable for the funds it
received to transport that portion of the shipment in addition to the
value of the lost or damaged commodities.[Footnote 28] According to
USDA officials, USDA filed 131 claims against vendors in fiscal year
2012, valued at $1.2 million. Since USAID and cooperating sponsors use
freight forwarders to manage logistics for ocean freight services,
USDA requires information from USAID, cooperating sponsors, and
freight forwarders to process ocean freight claims.
USDA's ability to file claims against ocean freight vendors depends on
having accurate information about changes that USAID makes to ocean
freight shipments after contracts are awarded. USAID can authorize
changes in a shipment that can result in changes to both deliveries
and the amounts USAID may pay to an ocean freight vendor. For example,
USAID may approve the substitution of one ocean freight vessel for
another or split a shipment onto two or more vessels. We found that
USAID diverted 60 percent of shipments destined for prepositioning
warehouses between fiscal year 2007 and 2012, potentially incurring
freight rates different from what the vendor would have charged to
deliver the commodities to the original destinations. According to
USDA officials, since freight forwarders do not regularly update
freight information in WBSCM, USDA officials must do additional work
to determine changes made to each freight award.
Additionally, USDA officials process ocean freight claims using
information in WBSCM, but they upload information they need to process
claims themselves since USAID and freight forwarders do not use the
system to track shipments or store freight information. USDA's ability
to file claims against ocean freight vendors depends on having
accurate information on ocean freight shipment details, confirmation
of each delivery, and the amounts that USAID pays for ocean freight in
WBSCM. According to USDA officials, WBSCM did not have the capability
to process ocean freight claims when the system was first implemented,
so USDA requested USAID, cooperating sponsors, freight forwarders, and
others to submit claims documentation outside of WBSCM. Although USDA
officials say claims could be processed through WBSCM since November
2012, USAID and freight forwarders continue to provide documents via
email, and regular mail instead of uploading documents into WBSCM.
[Footnote 29]
Furthermore, from June 2012 to June 2013, USAID did not send all of
the documentation that USDA required to process ocean freight claims.
In June 2012, USDA notified USAID of the documentation that USAID,
cooperating sponsors, and freight forwarders needed to provide USDA to
process claims. For example, USDA's guidance required USAID to provide
ocean bills of lading and freight vouchers.[Footnote 30] However, from
June 2012 to June 2013, USAID did not send USDA freight vouchers to
confirm the amount that USAID reimbursed to cooperating sponsors for
ocean freight. As a result, USDA relied on the ocean bill of lading to
identify the amount. However, USDA officials said they do not always
receive updated ocean bills of lading, particularly when shipments are
split between multiple vessels. Therefore, USDA did not always have
accurate information on the amount USAID actually paid. During the
course of GAO's work, USAID contacted USDA and made arrangements to
provide the necessary documents to assist USDA in its claims process.
As of February 2014, USAID had provided USDA with at least 190 freight
vouchers to process ocean freight claims since July 2013.
USDA and USAID Have Not Resolved Their Disagreement about WBSCM, but
Planned System Upgrades Provide an Opportunity to Collaborate More
Effectively:
USDA and USAID have been unable to collaborate effectively to resolve
their disagreement on the suitability of WBSCM for emergency food aid
procurement. In prior work, we have identified practices that can
enhance and sustain collaboration among federal agencies, thereby
improving performance and results.[Footnote 31] Although USDA's and
USAID's collaborative efforts have incorporated some of these elements
to develop WBSCM, they have not incorporated others. Nevertheless, an
upcoming functional upgrade of WBSCM offers the agencies an
opportunity to make substantial, mutually agreeable changes to WBSCM.
USDA and USAID Have Not Been Able to Collaborate to Resolve
Disagreements over WBSCM:
USDA and USAID have not collaborated effectively to resolve their
disagreement on the suitability of WBSCM for emergency food aid
procurement. Although USDA's and USAID's efforts have incorporated
some practices to enhance and sustain collaboration they have not
incorporated others. As we mentioned above, the agencies held weekly
meetings to identify needs and priorities, created an action list, and
assigned relevant individual USDA and USAID officials to specific
tasks on the list between November and December 2011. However, by
March 2012, the agencies could not agree on how to move forward with
using WBSCM to procure bulk ocean freight and USAID has not tested
changes that USDA has made to the system since March 2012.
Specifically, USDA and USAID do not agree on the roles and
responsibilities of key participants in the international food aid
procurement process, do not share a defined outcome for their
collaboration, and do not have a written agreement stating how the
agencies will collaborate.
* Clarify roles and responsibilities. While USDA and USAID have
designated some roles and responsibilities between themselves, they do
not agree on the role and responsibilities that the freight forwarders
should have in entering and updating information in WBSCM. Our prior
work found that a key factor of effective collaboration is that
agencies clarify the roles and responsibilities of those participating
in the collaborative effort.[Footnote 32] During the design phase of
WBSCM, the agencies assigned the freight forwarders responsibility for
entering information about individual shipments and updating the
information whenever there were changes. However, freight forwarders
we interviewed have said they were not consulted by either agency and,
after WBSCM was rolled out, they expressed concerns about the amount
of information they needed to update, according to agency documents
and officials. They noted that entering such information into WBSCM
was redundant with their own systems, cumbersome, and time consuming
given the system problems WBSCM was experiencing. As we previously
noted, USAID informed USDA in June 2012 that they would no longer
require the freight forwarders to update shipment information in WBSCM
for USAID's international food aid shipments. The lack of updated
information has created challenges for USDA in processing claims and
ensuring that they have accurate inventory information.
* Agree on common goals. USDA and USAID established some joint action
items for WBSCM, but they do not agree on a common goal for its
further development and use of WBSCM. Our prior work has found that
most experts we interviewed in collaborative resource management
emphasize the importance of collaborative groups having clear
goals.[Footnote 33] Experts noted that participants may not have the
same interests, but establishing common goals provides them a reason
to participate in the process. After the rollout, as problems arose,
USDA and USAID agreed that USAID would suspend using the system for
bulk freight procurement, and then for tracking prepositioned food aid
inventory. They also agreed that freight forwarders would not be
required to update freight information as changes in the shipments
occurred. While the agencies collaborated to resolve some problems,
such as creating a role for the stevedores in WBSCM, they have not
resolved whether USAID would resume trying to use WBSCM fully for bulk
freight procurement, tracking and updating information on shipments,
and recording prepositioned food aid inventory. As we noted above, as
of February 2014, USAID had not agreed to test the changes that USDA
made to the system since March 2012 to improve its performance and
functionality to procure emergency food aid. In its response to this
report, USAID stated that it would test the international procurement
functions of WBSCM.
* Written collaborative agreements. USDA and USAID have not documented
how they would further develop and use WBSCM, or how they would
resolve their outstanding issues. Our prior work found that agencies
that articulate their agreements in formal documents can strengthen
their commitment to working collaboratively.[Footnote 34] As we have
previously reported, having a clear and compelling rationale to work
together is a key factor in successful collaborations. Agencies can
overcome significant differences when such a rationale and commitment
exist.[Footnote 35] USDA and USAID have a memorandum of understanding
(MOU) concerning the emergency food aid program that FSA and USAID
signed in 1991.[Footnote 36] FSA and USAID have drafted, but not yet
signed, an updated MOU that USDA's General Counsel is currently
reviewing. According to USDA officials, both MOUs generally cover
USAID's and USDA's roles and responsibilities in carrying out
emergency food aid operations. However, neither MOU specifies the
roles and responsibilities of either agency or desired outcome
regarding their collaboration on WBSCM.
Planned WBSCM Upgrades Provide an Opportunity to Address System
Deficiencies:
USDA officials said in August 2013 that they have addressed several of
WBSCM's performance and functional issues; however, they note that
reconfiguring WBSCM to fully address USAID's needs will require
additional technical and functional upgrades. In September 2013, USDA
began a technical upgrade of WBSCM to replace some system components
and software that are obsolete and are increasingly difficult to
maintain. According to USDA officials, the technical upgrade should
also result in some benefits for users, such as improved performance,
and allow users to better segregate and identify the cost of split
shipments. In addition, the technical upgrade will enable users to
access the system using the most current versions of Internet
Explorer, which is a widely used Internet browser. A USDA official
cautioned, however, that because USDA has just begun making this
upgrade, it cannot be sure of the full scope of the improvements that
will occur.
The technical upgrade will be the foundation for a more extensive,
functional upgrade that USDA plans to conduct in fiscal years 2015
through 2017, according to USDA officials. To make WBSCM a more
effective system, USDA intends to change the functionality of WBSCM to
align with current commercial business practices. Therefore, as part
of the functional upgrade effort, USDA plans to examine domestic and
international commercial food business trends and best practices and
the extent to which its food aid procurement processes reflect them.
According to USDA officials, the planned functional upgrade would
provide an opportunity to fully address USAID's concerns. For example,
the functional upgrade could allow USDA to re-configure WBSCM so that
it fits USAID's bulk ocean freight procurement needs. As mentioned
previously, USAID officials told us that they are willing to use WBSCM
to procure bulk ocean freight and manage inventory if USDA is able to
address the deficiencies that they and others have identified.
Conclusions:
USDA and USAID have joint responsibility to carry out the Food for
Peace program and respond to global emergency food crises. Toward that
end, USDA developed a web-based system with USAID's input to manage
the procurement of food aid. However, because of WBSCM's deficiencies,
USAID discontinued use of the system starting in 2011. The agencies
are currently at an impasse. USDA has made modifications to the
system, but it is unclear if these would fully respond to USAID's
concerns, and USAID has not tested the modifications. Their continued
disagreement on the usefulness of WBSCM is hindering USDA's ability to
prepare accurate financial reports and efficiently file claims to
recover funds. USDA's planned major upgrade of the system affords USDA
and USAID an opportunity to revisit their collaboration on WBSCM and
improve the system so that it meets the needs of all users and to
ensure that USDA has reliable and accurate data to prepare its
financial statements and account for U.S. government funds.
Recommendations for Executive Action:
To improve the efficiency and accountability of the emergency food aid
procurement process, we recommend the Secretary of Agriculture and
Administrator of USAID direct their staffs to work together to take
steps to:
* improve USDA's ability to account for U.S. government funds by
ensuring that USAID provides USDA with accurate prepositioned
commodity inventory data that USDA can independently verify; and:
* assess WBSCM's functionality by testing the international
procurement functions that have been modified since April 2011 and
documenting the results.
* In preparation for WBSCM's functional upgrade, we recommend the
Secretary of Agriculture and Administrator of USAID direct their
staffs to work together to take steps to:
* develop a written agreement signed by both agencies that clearly
outlines the desired outcomes of their collaboration and the roles and
responsibilities of participants, such as freight forwarders.
Agency Comments and Our Evaluation:
We provided a draft of this report to USDA and USAID for comment. USDA
and USAID provided written comments on the draft, which are reprinted
in appendixes II and III, respectively. We also received technical
comments from USDA and USAID, which we incorporated throughout our
report as appropriate. USDA generally agreed with our recommendations
and expressed willingness to continue to initiate improvements in the
efficiency and accountability of the emergency food aid procurement
process. USAID agreed to test WBSCM's current functionality and to
clarify the roles and responsibilities of participants in a written
agreement with USDA. Regarding our recommendation to ensure that USAID
provides USDA with accurate prepositioned commodity inventory data
that can be independently verified, USAID stated it is of the view
that commodities move off USDA's books and onto those of USAID when a
contractor takes possession, on USAID's behalf, of the commodities in
question. However, according to USDA and its independent auditor, the
CCC retains the ownership of the commodity inventory until USAID
distributes it from the warehouse. USAID did not comment on the
concerns we identified about the quality of USAID's internal controls
and inventory data, which need to be addressed regardless of which
agency includes the data in its financial reporting.
In addition to providing copies of this report to your offices, we
will send copies to interested congressional committees, the Secretary
of Agriculture, and the Administrator of USAID. We will make copies
available to others on request. In addition, the report is also
available at no charge on the GAO website at [hyperlink,
http://www.gao.gov].
If you or your staff has any questions about this report, please
contact me at (202) 512-9601 or melitot@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix IV.
Sincerely yours,
Signed by:
Thomas Melito:
Director, International Affairs and Trade:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
Our review focused on the procurement process for the Title II
emergency food aid program managed by the U.S. Department of
Agriculture (USDA) and the U.S. Agency for International Development
(USAID). This report examines (1) the extent to which agencies agree
to use WBSCM to manage the international emergency food aid
procurement process; (2) how the agencies' use of WBSCM and other
systems affects USDA's ability to have accurate information about
emergency international food aid shipments; and (3) the extent to
which the agencies are collaborating on how to use WBSCM.
To provide context and background on the Title II emergency food aid
procurement process, we analyzed the total food aid expenditures and
tonnage data for fiscal years 2007 through 2012. The data that we
obtained included USAID commodity and ocean freight funding data for
fiscal years 2007 through 2012. These data were presented for context
and background purposes only, and we determined they were reliable for
our purposes. We also analyzed budget processes, financial reporting
requirements, contract documents, cooperating sponsor cooperative
agreements and transfer authorizations, legislation, acquisition
regulations, and past GAO food aid reports to understand the emergency
food aid procurement process.
To examine the extent to which the two agencies use the Web Based
Supply Chain Management System (WBSCM) to manage the international
emergency process to procure commodities and ocean freight
transportation, we interviewed USDA and USAID officials and reviewed
documentation. At USDA, we met with officials of the Agricultural
Marketing Service; Foreign Agricultural Service, and Farm Service
Agency, including officials in the Farm Service Agency's Commodity
Office in Kansas City, Missouri. At USAID, we met with officials of
the Office of Food for Peace and the Transportation Office in
Washington, D.C. Documents we reviewed included agency procurement
schedules, organizational charts, policies and procedures, and flow
charts, as well as contract documents, legislation, and acquisition
regulations. We also obtained and analyzed USDA and USAID memos,
briefings, and newsletters that discuss what WBSCM was designed to do
and concerns surrounding the use of WBSCM. We observed how both
agencies use WBSCM, and USAID officials explained or demonstrated some
of the systems that they use separately from WBSCM to procure and
manage emergency food aid, including USAID's Food for Peace Management
Information System.
In addition to conducting interviews with agency officials and
obtaining agency documentation, we conducted interviews with and
obtained documentation from officials of the World Food Program and
private voluntary organizations. We also interviewed and obtained
documentation from six of the seven freight forwarders that manage the
transportation of food aid from the U.S. load port to the foreign
destination or overseas prepositioned warehouse port. We did not test
the system ourselves because it was beyond the scope of this review to
simulate multiple food aid procurements, including the variances that
occur during the shipping process, and simulate the interface for
multiple users. We did not assess the extent to which USDA uses WBSCM
for its domestic and international food aid programs, or whether WBSCM
performs these functions effectively because that was beyond the scope
of this engagement.
To examine how the agencies use of WBSCM and other systems affects
USDA's ability to have accurate information as well as USDA's ability
to efficiently recover U.S. government funds from lost or damaged
commodities during ocean transit, we interviewed officials from USDA's
Commodity Operations Office and USAID's Office of Food for Peace,
Transportation Office and Office of the Chief Financial Officer. To
examine how USAID's use of systems outside of WBSCM affects USDA's
ability to report and account for U.S. government funds, we obtained
and analyzed USDA and USAID documentation and spreadsheets used to
track foreign prepositioned commodity inventory levels and how these
are used to provide information for financial statements. The
documentation that we obtained and analyzed included warehouse
inventory reports prepared by each of the contractors that manage
USAID's foreign prepositioned warehouses, as well as a consolidated
warehouse inventory spreadsheet that USAID has provided to USDA to
comply with USDA's request for inventory data to use in complying with
applicable financial reporting requirements.
We also drew on work conducted for a recent report to describe the
systems that USAID relies upon to track emergency food aid
shipments.[Footnote 37] For that report, we collected data on
emergency food aid shipments from fiscal years 2007 through 2012 from
the World Food Program and six freight forwarders. We assessed the
reliability of these data by asking the World Food Program and the six
freight forwarders that manage the transportation of Title II
emergency food aid for cooperating sponsors how they collected the
data, the quality checks that they perform, and the internal controls
they have in place to ensure the accuracy of the data. We also tested
some of the data for missing data, outliers, and obvious errors. In
total, we assessed the records for 5,142 emergency food aid shipments
during this period. Based on our assessments, we found that data for
1,357 shipments were not sufficiently reliable to determine how
prepositioning and diverting food aid affects the timeliness of food
aid deliveries. See appendix II in GAO-14-277 for the results of this
analysis.
To understand the applicable quarterly financial reporting
requirements that USDA must address to account for overseas
prepositioned food aid inventories, we analyzed how Congress
appropriates funding for this program. We also obtained and analyzed
applicable Office of Management and Budget (OMB) circulars, such as
the OMB Circular A-136 and other federal regulations. We also
identified the internal control requirements applicable to federal
agencies. These are contained in GAO's Standards for Internal Control
in the Federal Government.[Footnote 38] We compared the internal
control standards identified in this report with USDA and USAID's
actions in the procurement process.[Footnote 39] We also reviewed
internal control deficiencies identified in a January 2013 USAID
regional inspector general report, as well as in audits of the
Commodity Credit Corporation prepared by an independent auditor. We
did not independently audit the Commodity Credit Corporation's
financial statements, but the USDA Inspector General did not find
instances where the auditor did not comply, in all material respects,
with government auditing standards and the OMB Bulletin 07-04, Audit
Requirements for Federal Financial Statements, as amended. To assess
the extent to which the use of WBSCM and other systems affects USDA's
ability to process ocean freight claims and efficiently recover U.S.
government funds, we obtained and analyzed USDA and USAID documents
and emails that describe the claims documentation submission process
that the two agencies agreed to implement in June 2012. We also
examined the extent to which USDA and USAID are sharing claims-related
information by analyzing e-mails and freight vouchers submitted by
USAID to USDA from June 2013 through February 2014.
To examine the extent to which USDA and USAID collaborate on how to
use WBSCM, we obtained documentation from both agencies and developed
a timeline of events. The documentation obtained included annual
performance reports, letters, memos, emails, information bulletins,
updates to USDA's risk management plan, and meeting notes. We also
obtained a copy of a post-implementation review conducted by an
independent contractor that documented a number of findings related to
WBSCM. We interviewed officials from the USDA's Agriculture Marketing
Service, Foreign Agriculture Service, and Farm Service Agency, as well
as officials from USAID's Food for Peace and Transportation Offices.
We also interviewed six of the seven freight forwarders that manage
the transportation of food aid for USAID and cooperating sponsors.
After reviewing GAO's 2005 and 2012 reports on practices to improve
interagency collaboration, we compared the practices with USDA and
USAID actions from April 2011 to August 2013 and determined that five
of the practices were the most relevant in describing the agencies'
efforts to resolve their concerns about WBSCM.[Footnote 40] We
determined that the two agencies did follow two leading practices.
However, we also determined that there were three collaboration
practices that they had not followed. Our 2005 and 2012 reports
highlighted the need for agencies' to document their agreement to
collaborate through memorandums of understanding or other similar
documents. Also, our reports demonstrated the benefits of ensuring
that collaborating agencies agree and are clear with respect to their
roles and responsibilities. This includes agreeing on the role of the
contractors that implement the program. In addition, our reports
highlighted the importance of ensuring that collaborating agencies
have clearly defined goals.
We conducted this performance audit from March 2013 to March 2014 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the U.S. Department of Agriculture:
USDA:
United States Department of Agriculture:
Farm and Foreign Agricultural Services:
Farm Service Agency:
Office of the Administrator:
1400 Independence Ave. SW:
Stop 0501:
Washington, DC 20250-0501:
Voice: 202-720-3467:
Fax: 202-690-9105:
March 6, 2014:
To: Thomas Melito, Director:
International Affairs and Trade:
U.S. Government Accountability Office:
From: [Signed by] Juan M. Garcia;
Administrator:
Subject: U.S. Department of Agriculture Comments - GAO Draft Report,
GAO-14-0022, Better Agency Collaboration Needed to Assess and Improve
Emergency Food Aid Procurement System (320968):
The U.S. Department of Agriculture (USDA) appreciates the opportunity to
review the subject Government Accountability Office (GAO) draft report.
USDA generally agrees with the report's findings and recommendations
and will continue to initiate improvements in the efficiency and
accountability of the emergency food aid procurement process.
USDA agrees that there were issues with Web Based Supply Chain
Management (WBSCM) at implementation. However, the reasons U.S. Agency
for International Development's (USAID) Office of Acquisition and
Assistance Transportation Division (Transportation) for not using
WBSCM may have been addressed sooner had they chosen to participate
fully in the development of WBSCM. While other Agencies provided and
received feedback from their constituents and stakeholders in the
development of WBSCM, USAID Transportation provided very little
feedback. This lack of engagement and participation by USAID
Transportation caused assumptions to be made relating to the processes
developed in WBSCM that were in the end not acceptable to some of
USAID's constituents and stakeholders.
It is important to note that USDA agencies promoted within its
constituents the full use of WBSCM, thus in many cases, the same
constituents use the WBSCM entirely for USDA and not for USAID food
aid shipments."
With regard to the foreign preposition warehouse lack of accuracy of
inventory data, it is necessary to mention that the Commodity Credit
Corporation (CCC) retains ownership until the commodities are shipped
to cooperating sponsors. To safeguard food aid shipments, in June
2012, the USDA's Farm Service Agency implemented the Export Food Aid
Commodities licensing agreement establishing requirements, and
inspection and examination procedures for all ports and transloading
facilities receiving, storing, handling, and shipping commodities for
international food aid programs. The risk of storing CCC owned
commodities in a U.S. warehouse is managed through insurance, licensing
requirements, CCC agreements, bonds, irrevocable letters of credit,
among others. Currently USAID's foreign preposition warehouses storing
CCC owned commodities abroad are not licensed facilities. In fiscal
year 2013, USDA purchased 140,000 metric tons of commodities worth
more than $110 million destined to these foreign preposition
warehouses.
[End of section]
Appendix III: Comments from the U.S. Agency for International
Development:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
USAID:
From the American People:
Thomas Melito:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Melito:
I am pleased to provide USAID's formal response to the Government
Accountability Office (GAO) draft report entitled, "International Food
Aid: Better Agency Collaboration Needed to Assess and Improve
Emergency Food Aid Procurement System" (GAO-14-22).
This letter, together with the enclosed USAID comments, is provided
for incorporation as an appendix to the final report.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this audit
review.
Sincerely,
Signed by:
Angelique M. Crumbly:
Assistant Administrator:
Bureau for Management
U.S. Agency for International Development:
Enclosure: a/s:
USAID Comments on GAO Draft Report, No. GAO-14-22:
USAID appreciates the opportunity to comment on GAO's draft report
entitled "International Food Aid: Better Agency Collaboration Needed
to Assess and Improve Emergency Food Aid Procurement System."
USAID is in regular communication with the U.S. Department of
Agriculture's Agricultural Marketing Service (USDAIAMS) regarding
impediments to the use of Web Based Supply Chain Management (WBSCM)
for international emergency food aid procurement, and hopes that
the complexities of US AID procurement and supply chain needs are
better addressed in future system improvements than they were in the
design phase. System improvements made over the last year, including
improved response time, implementing an on-line grid to replace the KC-
366 Shipment Information Log form, and adding a role for stevedores,
have addressed some of USAID's concerns. However, significant barriers
to the use of WBSCM for both procurement and supply chain management
remain even with these system improvements and the future technical
upgrade.
Recommendation 1: To improve the efficiency and accountability of the
emergency food aid and procurement process, we recommend the Secretary
of Agriculture and Administrator of USAID direct their staffs to take
steps to improve USDA's ability to account for U.S. government funds
by ensuring that USAID provides USDA with accurate prepositioned
commodity inventory data that USDA can independently verify.
USAID is of the view that commodities move off USDA books and onto
those of USAID when the USAID freight/prepositioning contractor takes
possession of the commodities in question. This said, the Bureau for
Democracy, Conflict and Humanitarian Assistance's Office of Food
for Peace (DCHA/FFP) provides prepositioned commodity inventory data
to USDA quarterly. As recently as January 14th, 2014, USATD reached
out to USDA to discuss whether additional information could be useful.
[See comment]
Recommendation 2: To improve the efficiency and accountability of the
emergency food aid and procurement process, we recommend the Secretary
of Agriculture and Administrator of US AID direct their staffs to take
steps to assess WBSCM's functionality by testing the international
procurement functions that have been modified since April 20 II and
documenting the results.
USAID has discussed the modifications made to the international
procurement functions in WBSCM with both USDA and freight forwarders.
While some improvements have been made, significant issues still
exist, especially relating to bulk freight procurement. USATD will test
existing international procurement functions and provide documented
results to USDA.
Recommendation 3: In preparation for WBSCM's functional upgrade, we
recommend the Secretary of Agriculture and Administrator of US AID
direct their staffs to work together to take steps to develop a
written agreement that clearly outlines the desired outcomes of their
collaboration and the participants' roles and responsibilities, such
as freight forwarders, for using WBSCM that is signed by both agencies.
USATD agrees with this recommendation, and will work with stakeholders
and USDA to clarify roles and responsibilities as well as desired
outcomes for collaboration on WBSCM.
Following is GAO's comment on USAID's letter.
GAO Comment:
USAID stated it is of the view that commodities move off USDA's books
and onto those of USAID when a USAID contractor takes possession of
the commodities in question. However, according to USDA and its
independent auditor, CCC retains ownership of the inventory when it is
in USAID's possession. Nevertheless, we identified concerns about the
quality of USAID's internal controls and inventory data, which need to
be addressed regardless of which agency includes the data in its
financial reporting.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Thomas Melito, (202) 512-9601 or melitot@gao.gov:
Staff Acknowledgments:
In addition to the person named above, Valérie L. Nowak (Assistant
Director), Rhonda Horried, Mark Needham, José M. Peña III, Ashley
Chaifetz, Fang He, Martin De Alteriis, Mark Dowling, Etana Finkler,
Karen Deans, and Carol Bray made significant contributions to this
report.
[End of section]
Related GAO Products:
International Food Aid: Prepositioning Speeds Delivery of Emergency
Aid, but Additional Monitoring of Time Frames and Costs Is Needed.
[hyperlink, http://www.gao.gov/products/GAO-14-277]. Washington, D.C.:
March 5, 2014.
World Food Program: Stronger Controls Needed in High-Risk Areas.
[hyperlink, http://www.gao.gov/products/GAO-12-790]. Washington, D.C.:
September 13, 2012.
Farm Bill: Issues to Consider for Reauthorization. [hyperlink,
http://www.gao.gov/products/GAO-12-338SP]. Washington, D.C.: April 24,
2012.
USDA Systems Modernization: Management and Oversight Improvements Are
Needed. [hyperlink, http://www.gao.gov/products/GAO-11-586].
Washington D.C.: July 20, 2011.
International Food Assistance: Better Nutrition and Quality Control
Can Further Improve U.S. Food Aid. [hyperlink,
http://www.gao.gov/products/GAO-11-491]. Washington, D.C.: May 12,
2011.
International Food Assistance: A U.S. Governmentwide Strategy Could
Accelerate Progress toward Global Food Security. [hyperlink,
http://www.gao.gov/products/GAO-10-212T]. Washington, D.C.: October
29, 2009.
International Food Assistance: Key Issues for Congressional Oversight.
[hyperlink, http://www.gao.gov/products/GAO-09-977SP]. Washington,
D.C.: September 30, 2009.
Foreign Assistance: Various Challenges Limit the Efficiency and
Effectiveness of U.S. Food Aid. [hyperlink,
http://www.gao.gov/products/GAO-07-905T]. Washington, D.C.: May 24,
2007.
Foreign Assistance: Various Challenges Impede the Efficiency and
Effectiveness of U.S. Food Aid. [hyperlink,
http://www.gao.gov/products/GAO-07-560]. Washington, D.C.: April 13,
2007.
[End of section]
Footnotes:
[1] Section 3001 of Pub. L. No. 110-246, the Food, Conservation, and
Energy Act of 2008, changed the title of P.L. 480, originally named
the Agricultural Trade Development Aid Act of 1954, to the Food for
Peace Act. Title II of the Food for Peace Act, administered by USAID,
addresses donation of agricultural commodities for humanitarian
purposes. Other U.S. food aid programs are administered through the
U.S. Department of Agriculture, including Food for Peace Title I, Food
for Progress, and the McGovern-Dole International Food for Education
and Child Nutrition programs.
[2] Allocation means a delegation, authorized in law, by one agency of
its authority to obligate budget authority and outlay funds to another
agency. GAO, A Glossary of Terms Used in the Federal Budget Process,
[hyperlink, http://www.gao.gov/products/GAO-05-734SP] (Washington,
D.C.: Sept. 2005).
[3] Office of Management and Budget, Circular A-136, Financial
Reporting Requirements.
[4] We did not assess the extent to which USDA uses WBSCM for its
domestic and international food aid programs or whether WBSCM performs
these functions effectively.
[5] GAO, International Food Aid: Prepositioning Speeds Delivery of
Emergency Aid, but Additional Monitoring of Time Frames and Costs Is
Needed, [hyperlink, http://www.gao.gov/products/GAO-14-277],
(Washington, D.C.: Mar. 5, 2014).
[6] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
September 1999) and Internal Control: Internal Control Management and
Evaluation Tool, [hyperlink, http://www.gao.gov/products/GAO-01-1008G]
(Washington, D.C.: August 2001).
[7] We developed this list of considerations through a review of
interviews with experts on collaboration, and a review of findings
from a number of our previous reports on collaboration in the federal
government. See GAO, Managing for Results: Key Considerations for
Implementing Interagency Collaborative Mechanisms, [hyperlink,
http://www.gao.gov/products/GAO-12-1022] (Washington, D.C.: Sept. 27,
2012) and Results-Oriented Government: Practices That Can Help Enhance
and Sustain Collaboration among Federal Agencies, [hyperlink,
http://www.gao.gov/products/GAO-06-15] (Washington, D.C.: Oct. 21,
2005).
[8] Acquisition planning integrates the efforts of personnel
responsible for purchasing to ensure that the government meets its
needs in the most effective, economical, and timely manner. Contract
formation includes soliciting, evaluating, and awarding contracts.
Contract administration includes several functions performed by a
government agency in accordance with federal acquisition regulations,
agency acquisition policies, and the terms of the contract.
[9] Packaged commodities are those shipped in woven polypropylene
bags, multi-walled paper bags, plastic containers, or steel cans and
drums. Bulk commodities, such as free-flowing grain and vegetable oil,
are those directly loaded and shipped in an ocean vessel's cargo hold.
[10] See [hyperlink, http://www.gao.gov/products/GAO-14-277] for
further information on USAID's prepositioning of emergency food aid.
[11] Congress has authorized the expenditure of up to $15 million
annually for overseas prepositioning storage costs. See Pub. L. No.
113-79,§3009.
[12] In the food aid community, "diversion" generally refers to loss
or theft of food aid. However, USAID and cooperating sponsors also use
"diversion" to refer to the redirection of food aid from some stage of
the prepositioning process to a foreign port to meet immediate needs.
In this report, "diversion" has the latter meaning.
[13] An ocean bill of lading is a document that establishes the terms
of a contract between USAID or a cooperating sponsor and the ocean
freight vendor. A bill of lading shows ownership of the cargo.
[14] USDA's domestic food aid agencies--Agricultural Marketing
Service, Food and Nutrition Service, and FSA--use WBSCM to order,
track, and pay for commodities used in domestic food aid programs.
These include the National School Lunch Program, which provides
nutritionally balanced, low-cost or free lunches to children. This
report does not review USDA's uses of WBSCM for the domestic food aid
procurement processes.
[15] USDA managed its prior processes with systems that lacked online
procurement capabilities, such as bidding, procuring, contracting, and
invoicing.
[16] As mentioned above, we did not assess whether the functions for
which USDA uses WBSCM perform effectively. We therefore did not verify
whether the changes USDA made have addressed USAID's concerns with
WBSCM.
[17] Bulk freight includes all vessels designed to carry bulk cargo
such as grain.
[18] The Commodity Credit Corporation (CCC) is a wholly owned
government corporation managed by USDA's Farm Service Agency (FSA).
[19] USDA agencies use WBSCM to manage their domestic and
international food aid programs. For example, they use WBSCM to
solicit, receive, and evaluate bids; award contracts; manage and track
food shipments; pay vendors; and process claims.
[20] According to USDA and USAID officials, the Foreign Agriculture
Service's international food aid programs generally process smaller
and fewer shipments than USAID's emergency food aid program.
[21] USAID Office of the Inspector General, Audit of USAID's Internal
Controls Over Prepositioned Food Assistance for the Horn of Africa,
Audit Report Number 4-962-13-004-P (Pretoria, South Africa: Jan. 7,
2013). In response to the USAID inspector general recommendation,
USAID stated that in July 2013 the agency had replaced Djibouti's
manual warehouse inventory control system with an automated system.
USAID officials also stated that they were working to develop a
tracking system to monitor the movement of commodities in and out of
the overseas prepositioned warehouses. However, according to USAID
officials, the development of the tracking system is being re-
evaluated due to funding constraints.
[22] [hyperlink, http://www.gao.gov/products/GAO-14-277].
[23] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[24] [hyperlink, http://www.gao.gov/products/GAO-14-277].
[25] In assessing the reliability of the food aid shipment data, we
determined that data on 3,785 shipments were sufficiently reliable for
the purposes of our analysis. According to USAID, the number of days
between the request for food and USAID's approval date is similar for
prepositioned and standard shipments. However, both USAID and World
Food Program officials noted that whether a shipment was sourced from
a prepositioning warehouse or the standard shipping process did not
affect the number of days between the request for food date and the
USAID's grant agreement date. We therefore determined that these data
were sufficiently reliable for the purposes of assessing the impact of
USAID's prepositioning program on the timeliness of emergency food aid
deliveries.
[26] CliftonLarsonAllen LLP, Independent Auditor's Report, December 3,
2013; and CliftonLarsonAllen LLP, Fiscal Year 2012 Management Letter,
November 5, 2012.
[27] A significant deficiency is a control deficiency or combination
of deficiencies in internal control that is less severe than a
material weakness, yet important enough to merit attention by those
charged with governance.
[28] Because nongovernmental cooperating sponsors take title to
commodities when they are loaded on an ocean vessel at the U.S. port,
it is the responsibility of the cooperating sponsors to file claims
against the ocean freight vendors for the value of lost or damaged
commodities. However, when USAID contracts for ocean transportation,
USDA retains the right to prosecute claims against carriers. Some
cooperating sponsors sign over rights to their freight forwarders or
USDA to file claims on their behalf.
[29] As mentioned above, since we did not assess whether the functions
for which USDA uses WBSCM perform effectively, we also did not verify
if the WBSCM claims function that USDA stated work have actually done
so since November 2012.
[30] USDA's guidance also required freight forwarders to provide
freight contracts and discharge/delivery surveys, among other
documents. In addition, the guidance required cooperating sponsors to
sign off their rights to have USDA to pursue a claim on their behalf.
[31] [hyperlink, http://www.gao.gov/products/GAO-12-1022] and
[hyperlink, http://www.gao.gov/products/GAO-06-15].
[32] [hyperlink, http://www.gao.gov/products/GAO-12-1022] and
[hyperlink, http://www.gao.gov/products/GAO-06-15].
[33] [hyperlink, http://www.gao.gov/products/GAO-12-1022] and
[hyperlink, http://www.gao.gov/products/GAO-06-15].
[34] [hyperlink, http://www.gao.gov/products/GAO-06-15].
[35] GAO, Next Generation Air Transportation: Collaborative Efforts
with European Union Generally Mirror Effective Practices, but Near-
Term Challenges Could Delay Implementation, [hyperlink,
http://www.gao.gov/products/GAO-12-48] (Washington, D.C.: Nov. 3,
2011).
[36] In 1991, FSA was called the CCC/Agricultural Stabilization and
Conservation Service.
[37] [hyperlink, http://www.gao.gov/products/GAO-14-277].
[38] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
September 1999) and GAO, Internal Control: Internal Control Management
and Evaluation Tool, [hyperlink,
http://www.gao.gov/products/GAO-01-1008G] (Washington, D.C.: August
2001).
[39] We also examined USDA and USAID's regulations, policies, and
guidance on internal controls. See USDA, Office of Chief Financial
Officer Regulation, Management Responsibility for International
Control Number: 1110-002 (Washington, D.C.: Jun 17, 2013) and USAID,
Automated Directive System Chapter 596, Management's Responsibility
for Internal Control (Washington, D.C.: Aug 8, 2012). We compared USDA
and USAID's internal control standards with their activities during
the procurement process; however, each agency's internal control
policies apply only to that agency and not to other agencies. Since
this program is jointly managed, we found GAO's internal control
standards were more appropriate because they apply to the U.S.
government.
[40] See GAO, Managing for Results: Key Considerations for
Implementing Interagency Collaborative Mechanisms, [hyperlink,
http://www.gao.gov/products/GAO-12-1022] (Washington, D.C.: Sept. 27,
2012) and Results-Oriented Government: Practices That Can Help Enhance
and Sustain Collaboration among Federal Agencies, [hyperlink,
http://www.gao.gov/products/GAO-06-15] (Washington, D.C.: Oct. 21,
2005).
[End of section]
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